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Felcor Suite Agrees to Purchase Bristol's Hotels

Felcor Suite Hotels Inc. agreed today to buy the Bristol Hotel Company's hotel properties for almost $1.2 billion in stock and the assumption of $700 million of debt, making it the largest owner of Holiday Inns and expanding it beyond all-suite hotels.

Before the purchase, Bristol said, it will spin off a new company that will manage its former hotels. The purchase will more than double the number of properties owned by Felcor, which has hotels under such brands as Embassy Suites. Felcor expects the move to add to earnings as it renovates the hotels to raise occupancy and room rates. The transaction is the second in as many weeks where a hotel operator agreed to link up with a real estate investment trust to take advantage of the special tax-saving status awarded to REIT's.

''Bristol felt pressure to get their assets under the REIT structure,'' because of the tax advantages. said David Loeb, a Credit Lyonnais analyst, who rates Bristol a ''buy.'' REIT's can shelter some income from taxes so long as they pay out at least 95 percent of earnings as dividends.

''Instead of paying $35 million a year to the I.R.S., we'll be distributing that money to our shareholders,'' Bristol's chief executive, Peter Kline, said, adding that he sees ''no future'' in owning real estate outside a REIT format.

Under the deal, which was first reported in The Wall Street Journal today, Felcor will swap 0.685 share for each Bristol share. Bristol holders will also get a share of the operating company called Bristol Hotels and Resorts Inc. for each of their shares. Those are expected to be valued at $2.50 to $3.50 each. Felcor owns 75 hotels with 18,521 suites and rooms, mostly under the Embassy Suites and Doubletree Suites brand names. The Promus Hotel Corporation, which owns those brands, holds about 1.2 percent of Felcor's stock. Bristol, also based in Dallas, will own 121 hotels with pending acquisitions with more than 28,000 rooms.

The purchase will create the third-largest hotel REIT behind Starwood Hotels and Resorts and Patriot American Hospitality Inc.